Alberta and Saskatchewan are losing skilled workers to other parts of Canada during this downturn in commodity prices.
How can these provinces stem the “brain drain” and retain talent?
Recent reporting indicates more than 7,000 people now leave Alberta each quarter for British Columbia, while another 5,000 leave for Ontario. Such rapid outmigration should prompt discussion on measures governments might take to stanch the flow of talent.
This seems to be strongly linked to changes in the western Canadian labour market. Unemployment in Alberta has risen from 4.6% two years ago to 8.4%, while in Saskatchewan it has doubled from 3.4% to 6.8%.
Several initiatives in other countries and provinces have been tried. None, however, is a perfect fit for these two Prairie provinces.
Denmark, for example, has provided job retraining programs since the 1960s. Although the particulars of the Danish system have evolved over the decades, the central concept has remained the same: Individuals experiencing layoffs are entitled to receive vocational training intended to equip them to meet the changing demands of the economy.
In western Canada, such a system would entitle workers formerly engaged in the extractive industries to learn skills useful for a reasonably similar job in another industry through government-mandated training programs.
The evidence on Denmark’s success, however, is not encouraging. A decades-long study into the effectiveness of Denmark’s retraining program found that, when comparing those who participated in the programs to those who declined, there was no difference in success rates for those seeking new jobs nine months after training concluded.
This was attributed to the limited capacity for governments to anticipate precisely which skills will be needed by the private sector in future years. Furthermore, no change in wage rates was observed among participants and non-participants. In fact, short run unemployment increased among participants because of the “lock-in effect”: time spent on studying and preparing for class took away time from searching for jobs and submitting applications.
An apparently more successful model can be found in some jurisdictions in the United States, such as Michigan, have experienced success retaining labour through place-based college scholarships. Families are less inclined to relocate when they know that toughing out challenging economic times will also secure cost-free post-secondary education for their children. It is also hoped that these same post-secondary institutions will be responsive to the changing needs of the labour market, avoiding the need for the kind of government-mandated job retraining programs previously described.
This model does not address families’ immediate need for employment or the economic impact of such widespread unemployment. In fact, the promise of such scholarships would present another financial burden on governments that could be struggling with significant public debt in the future.
To some extent, the outmigration from Alberta and Saskatchewan can best be addressed by industry itself, retraining current employees rather than simply letting them go. A growing body of research indicates that businesses can lower their labour costs by retaining and retraining current employees rather than hiring new ones.
A 2011 study by the Center for American Progress indicates that replacing a new employee costs 16-20% of the position’s annual salary in recruitment, training, and other administrative activities. As such, companies in the extractive industries aggressively downsizing are not lowering their labour costs, they are simply delaying them until the next resource boom requires hiring new employees or attempting to rehire those who have since left Alberta and Saskatchewan.
None of these challenges absolves provincial governments from acting on rising unemployment. Faced with long-term unemployment and the exodus of its youth, Nova Scotia has stemmed the tide to some degree through the creation of youth entrepreneurship programs.
Alberta announced in September a 30% tax credit for investments in small businesses but this does not quite fit the bill, as youth entrepreneurs demonstrably benefit more from start-up grants and would only be eligible for such investments once their businesses have become commercially viable. In short, such a tax credit is likely only to incentivize the expansion of well-established small businesses in Alberta.
Outmigration presents a highly complex problem for Alberta and Saskatchewan. The development of effective policy solutions requires a serious, open-minded dialogue among public and private stakeholders. In the absence of action, Alberta will continue to lose the equivalent of the towns of Canmore or High River to other provinces every three months, further threatening to stall economic recovery.
– Paul Pryce is a frequent writer on public policy and economic trends in western Canada